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Economy, Finance and Trade in the Middle East and Africa

October 2019

The Middle East and Africa (MEA) is home to greatly differing economies, with the countries of the Gulf Cooperation Council (GCC) being among the richest globally in terms of GDP per capita, while many Sub-Saharan markets belong to the poorest nations worldwide. The region remains highly dependent on hydrocarbons, with oil prices being the prime determinant of economic performance across MEA. While obstacles to investment remain, improvements across MEA are being witnessed in terms of FDI.

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Key Findings

MEA is home to vastly differing economies

 The economic structures of the countries in MEA show notable differences. While the oil-exporting countries of the GCC are amongst the richest globally, the oil-importing countries show much lower GDP per capita levels, with some Sub-Sahara African markets belonging to the poorest nations worldwide. Furthermore, the oil exporting economies of the region tend to have rather undiversified export and revenue profiles, whereas the oil importing markets of MEA show higher levels of economic diversification.

Oil prices remain the determining factor for economic performance

On a regional level, oil prices are the most important factor determining economic performance. With the largest MEA economies (eg Saudi Arabia, Iran, Nigeria) being highly dependent on oil exports, a slump in oil prices would mean that these countries face enormous budget deficits. A drop in oil prices can also have a negative knock-on effect on oil importing countries (eg Egypt, Jordan), as their economies are highly dependent on remittance inflows from the GCC.

While obstacles to investment remain widespread, improvements are made

MEA continues to attract limited foreign direct investment (FDI) compared to other developing regions such as Latin America and Asia Pacific. The main reason for limited FDI levels are pervasive corruption, a lack of skilled labour, volatile foreign exchange rates, and frequent policy changes. Nevertheless, improvements have been made with Kenya, Egypt and Iran recording increased FDI inflows in 2013-2018.

Rising public debt levels in MEA is a cause for concern

While MEA continues to have a modest public-debt-to-GDP ratio, debt levels crept up in 2013-2018. This increase is chiefly driven by low oil prices that both weaken the economic resilience of MEA and limit government spending on economic development, as more money goes to servicing sovereign debt.

Introduction

Scope
Key findings

Regional Economic Overview

Oil still a vital aspect of economic development in MEA
Low oil prices put pressure on the dominant mining and quarrying sector
Despite natural resources, MEA has the lowest GDP per capita globally
Continued importance of remittance inflows across MEA
Israel leads in FDI inflows
Currency depreciations driving high inflation levels in Egypt and Nigeria
Impact of lower oil prices on the Saudi economy
Impact of a global downturn on the South African economy
Impact of a global downturn on the Iranian economy

Regional Trade Profile

GCC’s trade surplus caused by recovering oil prices
Transportation exports pick up as oil stagnates
Intraregional trade remains limited, while Asia is MEA’s leading partner

Regional Government Finances

Increasing sovereign debt levels in MEA reason for concern
Dropping foreign exchange reserves triggered by falling oil prices

Country Snapshots

Algeria: economic structure and foreign investment overview
Algeria: inflation, exchange rates, and export profile
Bahrain: economic structure and foreign investment overview
Bahrain: inflation, exchange rates, and export profile
Cameroon: economic structure and foreign investment overview
Cameroon: inflation, exchange rates, and export profile
Egypt: economic structure and foreign investment overview
Egypt: inflation, exchange rates, and export profile
Iran: economic structure and foreign investment overview
Iran: inflation, exchange rates, and export profile
Israel: economic structure and foreign investment overview
Israel: inflation, exchange rates, and export profile
Jordan: economic structure and foreign investment overview
Jordan: inflation, exchange rates, and export profile
Kenya: economic structure and foreign investment overview
Kenya: inflation, exchange rates, and export profile
Kuwait: economic structure and foreign investment overview
Kuwait: inflation, exchange rates, and export profile
Morocco: economic structure and foreign investment overview
Morocco: inflation, exchange rates, and export profile
Nigeria: economic structure and foreign investment overview
Nigeria: inflation, exchange rates, and export profile
Qatar: economic structure and foreign investment overview
Qatar: inflation, exchange rates, and export profile
Saudi Arabia: economic structure and foreign investment overview
Saudi Arabia: inflation, exchange rates, and export profile
South Africa: economic structure and foreign investment overview
South Africa: inflation, exchange rates, and export profile
Tunisia: economic structure and foreign investment overview
Tunisia: inflation, exchange rates, and export profile
UAE: economic structure and foreign investment overview
UAE: inflation, exchange rates, and export profile
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